Schilling seeks dismissal of suit over 38 Studios

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Last Updated: Mon, Mar 04, 2013 22:45 hrs

Former Boston Red Sox pitcher Curt Schilling asked a Rhode Island judge to dismiss a state economic development agency's lawsuit over its $75 million loan guarantee for his now-defunct video game company, calling claims he and fellow executives misled the agency "implausible."

The state Economic Development Corp. in November sued Schilling, other 38 Studios executives and some of its own former officials, including Keith Stokes, the executive director at the time. The lawsuit claims the defendants misled the agency's board into signing off on the loan guarantee in 2010 and withheld information, including that the company needed more money than it was getting from the state's bond sale to complete a video game in production in Providence.

The company filed for bankruptcy in June, and Rhode Island is now likely on the hook for some $100 million, when interest is factored in.

The filing seeking dismissal says Schilling and the other 38 Studios defendants — the former chief executive and financial officers and the board chairman — repeatedly disclosed the company's financial needs to Economic Development Corp. officials. It notes that the initial lawsuit says Stokes and others at the agency, including two law firms working for it, knew 38 Studios needed the full $75 million, but that it was getting only about $50 million because some was to be kept in reserve.

"Given the EDC's admissions concerning 38 Studios' disclosures to the EDC's executives, attorneys and financial advisor, it is impossible for the EDC simultaneously to claim that the 38 Studios defendants supposedly defrauded the EDC," the filing says.

The filing says the economic agency's board "well knew" the amount 38 Studios was getting wouldn't be nearly enough to fully finance the game. The resolution approved by the board says the estimated cost of the game's production is "in excess of $125 million."

The filing also says the agency's lawsuit doesn't prove anyone at 38 Studios knowingly made false statements to the agency.

The Economic Development Corp. and former Gov. Don Carcieri had held up 38 Studios' relocation from Massachusetts as a coup for economically struggling Rhode Island, saying it would bring hundreds of high-paying jobs and millions of dollars in tax revenue.

Max Wistow, who is representing the agency in its effort to recoup some of its investment in 38 Studios, said he is preparing a response to the filing, which is due in 30 days. He said in January he hoped the case would go to trial within a year. The agency's lawsuit doesn't seek a specific dollar amount, but wants Schilling and others to repay the bonds floated on 38 Studios' behalf and seeks triple damages.

Schilling's attorney could not immediately be reached. Stokes' attorney, David Martland, also filed a motion to dismiss but he would not comment further when reached Monday.

Schilling has sparred with Gov. Lincoln Chafee over 38 Studios' collapse, saying the governor had it out for the company and didn't do enough to help save it. He has called the suit political.